BHP to cut iron ore jobs as mining slowdown bites

Sonali Paul

4 IN. DI LETTURA

MELBOURNE (Reuters) - Top global miner BHP Billiton (BHP.AX) said it plans to shed an undisclosed number of jobs in iron ore, its most profitable business, as it battles weaker demand and higher costs, adding to mining job losses in Australia.

The BHP Billiton logo is seen at the company's head office in central Melbourne September 22, 2010. REUTERS/Mick Tsikas

The cuts in iron ore, following the closure of two of BHP’s coal mines, will stoke worries about weakness in the Australian economy, which has been underpinned by booming demand for iron ore and coal, now slowing due to cooling growth in China.

“What you’ve got to expect across the broader mining sector at the moment is that they’re all going to be cutting jobs,” said Glyn Lawcock, an analyst at UBS. “Clearly in the last few years what you’ve seen in the mining industry is excess.”

Global miners Rio Tinto (RIO.AX)(RIO.L) and Xstrata XTA.L have both announced job cuts at their Australian operations over the past month.

Concerns about weaker growth led the Reserve Bank of Australia to cut interest rates by 25 basis points in a surprise move last week following a dip in jobs, its third cut this year.

It could move again next month if the jobs report for September, due on Thursday, fails to show a small rise in employment.

Job losses in BHP’s iron ore arm, the business that made up more than half the group’s earnings last year, reflect weaker Chinese steel growth, which led BHP to shelve a $20 billion expansion at its Port Hedland iron ore port in August.

The International Monetary Fund reinforced the bearish view on China on Tuesday, cutting its forecast for Chinese growth this year to 7.8 percent from 8 percent.

Weaker demand from China has already hit BHP’s coal business, forcing it to close two mines where it had nearly 800 workers. It has said it aimed to redeploy most of those workers to other mines.

IRON ORE SLUMP

Iron ore producers have been hammered by a 42 percent drop in prices from this year’s high to a three-year low of $87 last month. Prices have since rebounded to $110, but remain below what had been seen as a floor price at $120.

BHP said on Tuesday it had reviewed the iron ore division and was letting employees know about a reorganization plan, which would result in some job cuts.

“BHP Billiton Iron Ore’s belief in the longer term attractiveness of the iron ore market remains unchanged,” the company said in an emailed statement.

“However we have spoken for some time about the challenges facing the resources industry, and we are not immune from the current global conditions.”

BHP employs just under 6,000 people in its iron ore unit, out of more than 46,000 in the company worldwide excluding contractors, but declined to say how many jobs would be cut.

The Age newspaper said it believed about 200 jobs would go.

Most of the people whose positions were being eliminated would be offered opportunities elsewhere in the business or elsewhere in the company, a spokesman said.

“There are currently approximately 900 open roles available across the iron ore business but until the redeployment process has been completed, it is too early to say how many people will be made redundant,” BHP said.